No, Money Doesn't Buy Success

Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.

Everyone has an idea, but most of us don't have unlimited capital to fund all those great ideas. As we've talked about in priorcolumns, the idea alone isn't worth much.

One entrepreneur we talked to recently wants to manufacture cooking oil in China. Joseph Dana, who is a serial entrepreneur, said, "I definitely do think I have a great idea, but I can't find any VC firms to introduce my business plan too. My idea is not technology-driven and it seems this is what everyone wants to fund."

Finding the Perfect Fit

The key for Joseph and others like him is finding the right investor--one that can bring expertise to help grow the business, as well as capital, and is focused on building businesses in the exact space you are targeting. Not all investors are focused on technology, but in Joseph's case, it's hard to find a private equity investor that is interested in manufacturing-oriented startups in China. Since there's no Yellow Pages of investors that classifies them down to their specific expertise, this search can turn into a herculean task.

We've noticed this problem working with companies in the food and beverage industry. The food and beverage space has a unique problem. In order to create a solid start-up, many brands have made it through the startup phase (see The 3 Horizons of Business Building) by creating a very appealing consumer-focused brand. They are selling their products through a few retailers, but in order to reach the next phases of investment and scaling, they need more than just growth capital. They need distribution expertise to get their brand in front of retailers and distributed to the right retailers and the right place on the shelf.

This distribution skill set is entirely different than the creative and inventive skill set that they used to build a successful start-up. Food and beverage distribution requires shrewd negotiation, persistent execution, and a deep understanding of retailer and consumer behavior. Regardless of whether the product appeals to the consumer, the brand won't be able to grow if it doesn't get in front of the right consumers at the right time.

Bringing Something More to the Table

Finding the right investor is critical to building your business. The investor that's a perfect fit will bring expertise, guidance and connections. Plus, closing a deal with them will be much easier, with better terms, than with an investor that has little knowledge of your industry. Our work in the food and beverage industry has led us to partner with a group of investors with 70+ years of distribution experience. Hopefully, we can match our capital with the right food and beverage brands to get them through the next phase of growth.